THE HONEST HEDGE FUND CLOSURE LETTER
A lot of smart hedge fund mangers are closing up shop. However their closure letters to their investors I think leave something to be desired. In the spirit of Christmas giving and the truth, I have decided to produce a generic hedge fund closure letter that hedge funds that are closing can use as a template to craft their own letters:
The game is finally over. It was wonderful while it lasted, but massive Central bank bond buying has sadly come to an end.
Ever since they panicked big time in 2009 and introduced massive quantitative easing its been a wonderful ride for stocks and bonds. We have not had to do anything, no stock picking skills required, just every year collect our massive 2 and 20, take very expensive holidays and buy ourselves lots of very expensive presents for Christmas. THANKS FED.
Its been a wonderful welfare scheme for investors and hedge funds, but the writing has been on the wall ever since that Trump fellow got elected President and those little riots in Paris just seem to confirm everything.
We looked like geniuses by just sitting tight and doing nothing. But the very action of this inaction is now making us look like fools.
Time to shut up shop and open that private office in order to take advantage of all the wonderful shorting opportunities, and then pick up all the cheap assets after the crash for cents in the dollar. Just remember: all good Ponzi's eventually come to an end.
Sorry got to go, the private jet to my holiday destination is waiting on the tarmac.
If Trump Inc is smart they, 4 layers deep in shell companies, or their friends, would be trading ES. Get short, have Donald tweet tariffs, Cha ching. Get long, have Donald tweet trade deal soon, Cha ching. I would be stunned if this isn't what is happening.
THE COYOTE CLIFF
A lot of the big car makers GM, BMW, Daimler seem to be adding lots of debt to pay out their big dividends
What happens when they cant add any more debt??????
Nothing good I think
All will cut or eliminate their dividends.
All candidates for the Coyote Cliff ETF
Globally there are fewer people in extreme poverty now than for a very long time, when the total population was a fraction of what it is now and certainly on a percentage basis less than ever. Now if one looks this up one can quibble on what defines extreme poverty but the basic point is sound.
Actually fewer people are under the threat of extreme violence or virtual slavery than perhaps ever, as a percent of all people.
I am the furthest thing from a Pollyanna one can imagine but let's get a grip. I live in a place that to my eyes just came out of the recession that started in 1973.
The Financial Review full of ten year articles on the Lehman collapse
But all the articles seem to miss the real issue
Lehman went under because it had excessive leverage of 30 to 1.
If it had been levered 15 to 1 it would have survived
Even with all the bad subprime it had on the balance sheet,
I had calculated months before Lehman collapsed that it had negative equity of 15 Billion and posted such information on this Board.
I also stated on this Board that it was going bankrupt several months before it actually did go kaput.
Lehman only had 20 Billion in equity backing up 600 Billion in assets and liabilities,
It was simply too little.
It needed at least double this equity level to survive.
Actually Deutche Bank currently has the same debt equity ratios as Lehman had when it went under!!!!!!!!!!!!
Thats why I think the German Government will have to bail it out.
QUANTITATIVE TIGHTENING AND TRADE DEFICITS
So China's trade surplus with the USA hits a new all time high
Well you can thank the FED for that.
Quantitative tightening means capital flows back to the USA from the periphery
Creating all the currency and credit collapses we have seen - Turkey, Argentina, Iran et al
And also the depreciation of the Yuan against the Dollar.
But its secondary effect is to increase American's purchasing power
And where does this purchasing power flow to????
To the import of more foreign goods to satisfy the consumptionist monster which lies at the heart of the American economy.
Right back to China and increases the trade deficit with China!!!!!
The Tarrifs are really a consumption tax on the American consumer.
So in a way they contribute to the "great rebalancing" between consumption and production that the American economy so badly needs.
But of course this is currently being cancelled out by QT!!!!!!!!!!!!!!!!!
The effects of the Presidents tarriff war against china are being cancelled out by the QT actions of the FED.
Oh the complete and total irony!!!!!!!!!!!!!!!!!!!!
Where is the Quantitative Tightening ETF when you need it??????????